Essar Energy 1st half profit tumbles 28%

Essar Energy,the holding company for the Essar Group’s power and oil & gas interests and listed on the London Stock Exchange,has reported 28% dip in its profit after tax to $111.9 million...

Written by Fe Bureau | Mumbai | Published: August 20, 2010 2:09 am

Essar Energy,the holding company for the Essar Group’s power and oil & gas interests and listed on the London Stock Exchange,has reported 28% dip in its profit after tax to $111.9 million (Rs 520.3 crore) for the half year ended June 30 compared to $155.5 million (Rs 723 crore) in the year ago period. Inventory gains and retail marketing profits in the prior period led to lower overall Ebitda. The company’s Ebitda sank 25% to $320.2 million (Rs 1,488.9 crore) in the six months to June. This was,however,offset by a $25 million (Rs 116.2 crore) improvement in power Ebitda,which was up 34% to $99 million (Rs 460.3 crore),Essar said in a statement.

Revenues,however,were up 66% to $4.76 billion (Rs 22,134 crore) during the period under review from $2.87 billion (Rs 13,200 crore) a year earlier. In April this year,Essar Energy announced its plans for an initial public offering (IPO) and raised $1.85 billion (Rs 8,602 crore) of net proceeds from what was the largest primary offering in the London market since 2007. Prashant Ruia,vice-chairman,Essar Energy,said,“Following the IPO,we immediately put the proceeds to good use. Our capex increased significantly in the first six months to $1.5 billion (Rs 6,975 crore) as we continued to deliver our 16 major growth projects under execution or advanced stages of development. This is out of our total capital programme of over $11 billion (Rs 5,1150 crore) by 2014.”

The Essar Energy management said that it continued to be in discussions with Shell for the acquisition of a couple of its refineries in Europe though the negotiations were no longer exclusive. Outlining the firm’s strategy,Ruia said that while Essar Energy would primarily focus on the demand for energy in the Indian market,it would look to acquire reserves of natural resources outside the country. Addressing a conference call from London,Ruia said,”We have to look for opportunities,including coal-bed methane reserves and shale gas reserves,it’s on our radar.”

Essar’s refinery continues to operate at above nameplate capacity,processing a record 7.28 million tonne of crude oil (53.1 million barrels) during the period,19.9% higher than the same period last year (44.3 million barrels). Current Price (CP) GRM,inclusive of sales tax benefit,stood at $6/bbl for the period,which was an improvement compared with the same period last year of $5.4/bbl. Essar Energy also owns over 1,340 retail fuel stations across India selling gasoline and diesel under the Essar brand.

In power,operationally,all plants performed well with a total generation of 3,192MWh (3,007MWh in 2009) during the period. Plant availability was 97.4% for Hazira 1,98.5% for Bhander,94% for Algoma and 94.7% for Vadinar during the six months ended June 30,2010. However power off-take for Hazira 1 was comparatively less due to lower demand from Gudjarat Urja Vikas Nigam Ltd and other customers. With the introduction of an availability based tariff scheme from April 5,2010,Bhander Power was able to capitalise on a frequency based pricing mechanism,thereby generating additional revenues. “The company continued to make significant progress with its plans to increase its operating capacity from 1,220 MW currently to 11,470 MW by the end of 2014,” Essar said.

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